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Topic Overview: RFID by Christine Spivey Overby

Helping Business Thrive On Technology Change

TOPIC OVERVIEW

April 26, 2006


TO P I C O V E R V I E W April 26, 2006

Topic Overview: RFID by Christine Spivey Overby with Ellen Daley, Noha Tohamy, and Robert Whitely

EXECUT I V E S U M MA RY Radio frequency identification (RFID) uses radio waves to transmit key information to and from small tags. This information can describe the identity and location of physical objects as varied as automobiles, hospital equipment, and cases of potato chips. In the case of active tags operating under battery power, RFID can also report an object’s condition. Although early RFID pilots have focused on the retail supply chain, more companies are now piloting RFID across other business processes including asset management, industrial automation, and track-and-trace. RFID is one of many technologies that extends the Internet to the physical world, vastly improving the way companies manage physical assets and products. The connection of the physical to the digital is a trend Forrester calls the Extended Internet (X Internet).

TABLE O F CO N T E N TS 2 Why RFID Matters 2 Forrester’s Take On RFID 4 The Basics 4 Best Practices 4 Trends And Forecasts 5 Vendor And Product Comparisons 5 Related Topics 7 Upcoming Research 8 For More Information

N OT E S & R E S O U R C E S Forrester compiled its most pertinent research on RFID to provide an overview of our research and perspectives on this subject.

Related Research Documents “RFID: The Complete Guide” March 16, 2005, Forrester Collection “Supply Chain Collaboration Checkup” February 2, 2005, Trends “RFID’s Influence On Technology Spending” June 1, 2004, Trends

© 2006, Forrester Research, Inc. All rights reserved. Forrester, Forrester Wave, Forrester’s Ultimate Consumer Panel, WholeView 2, Technographics, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. Forrester clients may make one attributed copy or slide of each figure contained herein. Additional reproduction is strictly prohibited. For additional reproduction rights and usage information, go to www.forrester.com. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change. To purchase reprints of this document, please email resourcecenter@forrester.com.


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Topic OVerview | Topic Overview: RFID

WHY RFID MATTERS During the next decade, more companies will use the Internet to connect to physical assets, products, and devices. This trend, which Forrester calls the X Internet, will help companies develop deeper insights about their physical operations, thereby boosting regulatory compliance, increasing customer loyalty, and driving up margins. One key technology in the X Internet trend is RFID, a data collection and identification technology that uses electronic tags to store and transmit identification data, location data, and — in the case of active tags — condition data (see Figure 1). FORRESTER’S TAKE ON RFID Thanks to commercial support, mandates from Wal-Mart and the US Department of Defense, and recent technology standardization, RFID is currently the most visible technology that bridges the digital and physical worlds. However, even with strong use cases and community support from the likes of EPCglobal, implementing RFID is no small task because of tag cost, complexity of implementation, and the business process transformation required. To date, companies have focused on just doing the bare minimum to meet commercial mandates. Companies now need to look for the business case beyond compliance with industry mandates, so RFID is not just a tax on operations. Many are doing so. For example, Kraft Foods not only participates in the Wal-Mart initiative, but also uses RFID to track assets between ingredient suppliers and its own manufacturing facilities — thereby streamlining receiving and production. Simultaneously, firms must diagnose the impact of RFID deployments on existing IT systems. To do so, they must rethink traditional business processes — mastering an “exceptions-driven” approach — and re-architect basic application, middleware, computing, storage, and networking platforms. Moving forward, as other types of X Internet technologies gain traction, companies must also determine which technology — passive RFID, active RFID, RTLS, or other sensors — is the best fit for a particular business opportunity.

April 26, 2006

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Topic OVerview | Topic Overview: RFID

Figure 1 RFID Provides Data Throughout The Product Life Cycle 1 Field

3 Ship

2 Factory

Harvest date: • 20 bushels of Frantoio olives • Location: Tuscany, Italy • Harvest date: November 3, 2001 • Method of harvesting: hand browsing • Pesticides: dimetoato

Production data: • Product: Tuscan olive oil • Manufactured at: Factory 3 • Date: November 5, 2001 • Process: cold press • Temperature: 18° Celsius • Shelf life: 12 months

4 Distribution center

5 Store

Retail store shelf data: • Contents: 30 bottles of Tuscan olive oil • Shelf life: 10 months • Price: $5.00 • Stock-out alert level: 10 bottles Checkout data: • Shopping cart contents include: one bottle of Tuscan olive oil • Total: $125.38 • Debit card no.: xxxx xxxx xxxx 1234 6 Home

Pantry data: • One 34-oz bottle of Tuscan olive oil • Expiration date: November 5, 2002 13834

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Shipping data: • Container number: 0003589 • Contents: 1,000 pallets of Tuscan olive oil • Origin: Rome, Italy • Routing: Rome to London to New York • Container last opened: December 1, 2001

Receiving/loading data: • 100 cases of Tuscan olive oil • 20 bottles per case • Date and time received: 12/30/2001; 09:26:48 (EDT) • Destination: Store X Pick and pack data: • Pick list: 10 cases of Tuscan olive oil • Bin location: aisle F, row 4

7 Recycling center

Recycling data: • Material: clear glass • Weight of material: 3 oz

Source: Forrester Research, Inc.

April 26, 2006

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THE BASICS Our baseline research gives you an overview of RFID and the drivers behind the technology. Forrester considers these documents essential to the understanding of this topic and are a great starting point for your organization.  RFID’s Influence On Technology Spending Christine Spivey Overby  RFID: The Smart Product (R)evolution Christine Spivey Overby  Sourcing An RFID Project Christine Spivey Overby  What Does The Bar-Code‘s Past Reveal About RFID‘s Future? Christine Spivey Overby BEST PRACTICES Forrester‘s best practices research offers constructive recommendations on how to implement and improve RFID initiatives.  How RFID Improves The Order-To-Cash Process Christine Spivey Overby  Mitigating The Risks Of Moving To Gen 2 RFID Simon Yates  Revealing RFID‘s Benefits In Consumer Goods Christine Spivey Overby  RFID: Icing On A Half-Baked Cake Noha Tohamy TRENDS AND FORECASTS In trends and forecasts research, Forrester interprets current trends in RFID and how they are expected to shape adoption.  How RFID Adopters Buy Technology Christine Spivey Overby

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Topic OVerview | Topic Overview: RFID

 Linking RFID And Global Data Sync Christine Spivey Overby  RFID Beyond The Supply Chain Christine Spivey Overby  RFID Traction In Logistics: Slow But Certain Noha Tohamy VENDOR AND PRODUCT COMPARISONS Knowing what to do is half the battle; knowing who can help get you there is the other half. Through Forrester Wave™ and market overview research, we help you understand the relative strengths and weaknesses of vendors and their offerings as they pertain to RFID.  Evaluating RFID Middleware Sharyn Leaver  Jump-Starting RFID Initiatives With Hosted Solutions Noha Tohamy  New Types Of RFID Service Providers Emerge Christine Spivey Overby  RFID Labs Aren‘t Created Equal Christine Spivey Overby  Symbol Jump-Starts RFID Hardware Consolidation Simon Yates RELATED TOPICS Different industries have specialized RFID use cases, specific technology standards and challenges, and unique regulation that impacts deployments. At the same time, companies across industries must diagnose RFID’s impact on existing IT systems. These research documents highlight industry and technology topics related to RFID. Business Intelligence New business intelligence tools are crucial for deriving insights from RFID data.  BI Vendors Are Sleeping Through RFID‘s Arrival Keith Gile and Philip Russom

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Topic OVerview | Topic Overview: RFID

 Deriving Business Value From The X Internet With The Right Business Intelligence Architecture Keith Gile and Mike Gilpin  RFID Will Expand Product-Oriented BI Practices Phillip Russom and Keith Gile RFID And ePedigree RFID deployments in pharmaceuticals differ from other consumer products due to heightened regulatory concerns and a near-term focus on item-level tagging.  Authentication, Not RFID, Will Make Drugs Safer Laura Ramos  FDA Pushes RFID Agenda On Pharma Laura Ramos  Pharma Won’t Meet ePedigree Deadlines Laura Ramos  TI, 3M, And VeriSign’s Rx For Drug Fraud Laura Ramos The X Internet RFID is one of the essential technologies of the X Internet. It provides physical characteristics and time-specific information about items and people. Other X Internet technologies include wireless sensors, mesh networks, and biometrics.  The Seeds Of The Next Big Thing Christopher Mines  The X Internet Carl D. Howe  The X Internet And Business Profitability Navi Radjou  Topic Overview: The Extended Internet Christine Spivey Overby and Ellen Daley

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Topic OVerview | Topic Overview: RFID

Privacy And Security RFID provides an unprecedented view of products, assets, and perhaps even people. Companies that want to use this technology must adopt privacy codes of conduct and basic security best practices.  Retailers Need An RFID Code Of Conduct Christine Spivey Overby  Securing The Network From The Inside Out Paul Stamp  The X Internet And Consumer Privacy Christine Spivey Overby UPCOMING RESEARCH “X Internet In 2006” Ellen Daley June 2006 “RFID And The Data Center” Richard Fichera August 2006 “Extended Internet Market Forecast” Ellen Daley and Christine Spivey Overby September 2006 “RFID And Its Impact On The Network” Robert Whiteley September 2006 “Evaluating RFID Middleware” Christine Spivey Overby October 2006 “How The Extended Internet Looks In The Store” Nikki Baird November 2006

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FOR MORE INFORMATION Analysts To Watch Forrester is continuously researching, analyzing, and writing about changes and new developments in technology. To keep abreast of future Forrester research on the subject of RFID, you may want to watch for new research coming from the following Forrester analysts:

· Ellen Daley. Ellen is a vice president and research director of Forrester’s Telecom & Networks

research team. Ellen covers how wireless and mobile technologies affect enterprises and organizations from a policy and technology perspective. She also focuses extensively on wireless networking technologies, including Wi-Fi, UWB, and mesh networking. Her focus on the X Internet will be on the technologies comprising the X Internet.

· Christine Overby. Christine works with Forrester‘s Consumer Markets research team

and analyzes the impact of technology change on consumer products (CP) manufacturers, distributors, and retailers. Since early 2002, Christine has led Forrester’s research on RFID adoption in consumer products and retail. She is the primary author of Forrester’s first RFID report, “RFID: The Smart Product (R)evolution,” and she has helped dozens of CP manufacturers and retailers with their RFID strategies. Her research has been cited in many publications, including The Wall Street Journal, The Globe and Mail, The Boston Globe, and Fortune.

· Noha Tohamy. Noha is the lead supply chain analyst at Forrester Research, where she uses

her years of experience as a supply chain practitioner to analyze how technology can help global companies optimize their business. As part of her research, she analyzes how solutions like supply chain analytics and visibility, order fulfillment, replenishment, and transportation management are deployed to optimize and build flexibility in supply chains.

Noha researches new trends that help manufacturers, retailers, and service providers cope with variations in demand. These include real-time demand management, sales and operations planning, inventory optimization, and the use of pricing solutions as a demand-shaping lever. She analyzes the evolution of business processes like supply chain collaboration and supply chain outsourcing in various industries, including consumer goods, high-tech, automotive, and retail.

· Rob Whiteley. Robert is a senior analyst on Forrester’s Telecom & Networks research team. In this role, Robert is responsible for covering all VPN technologies for both remote access and site-to-site connectivity. Robert also writes about network processors and microprocessors as they relate to communications hardware.

April 26, 2006

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Topic OVerview | Topic Overview: RFID

Research Help Desk Research specialists in Forrester’s Research Help Desk collaborate with Forrester analysts to compile these Topic Overviews for selected areas of Forrester’s coverage. If you have additional questions about this topic, please contact us at researchhelpdesk@forrester.com, and we will respond to your question within 36 hours. Research Alerts To be notified when a new document is published about RFID or by any of the analysts listed above, set up a Research Alert.

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